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—— ON THIS DAY ——
OCTOBER 24, 1929
New York City, USA
97 years ago
The Wall Street Crash of 1929, the collapse of share prices on the New York Stock Exchange that began on Black Thursday, October 24, and is the most famous financial panic in history.
When the opening bell rang at the New York Stock Exchange on the morning of Thursday, October 24, 1929, sell orders poured onto the floor in volumes never seen before. Prices fell so fast that the ticker tape, which printed transactions for brokers across the country, ran more than an hour and a half behind. Investors from Boston to San Francisco had no idea what their shares were worth, only that the number was falling. A crowd gathered on Wall Street outside the exchange, and the police sent extra men to keep order.
At noon, the heads of the largest banks in New York met across the street at the offices of J.P. Morgan and Company and agreed to pool money to support the market. At half past one their representative, the exchange's vice president Richard Whitney, strode onto the floor and loudly bid well above the market price for ten thousand shares of U.S. Steel, then did the same for other blue chips. The gesture worked. Prices rallied, and the day closed with modest losses on a record 12.9 million shares traded.
—— MARQUEE EVENT ——
The Great Depression, the worldwide economic collapse of the 1930s that followed the crash, in which a quarter of American workers lost their jobs and thousands of banks failed.
The market had been climbing for most of the decade. The Dow Jones Industrial Average had risen roughly sixfold since 1921 and peaked at 381 on September 3, 1929. Millions of ordinary Americans had bought shares for the first time, many of them on margin, putting down as little as ten percent and borrowing the rest from their brokers. That leverage made fortunes on the way up. On the way down it meant that falling prices triggered demands for more cash, which forced sales, which pushed prices lower still. Only days before the break, the eminent Yale economist Irving Fisher had declared that stock prices had reached what looked like a permanently high plateau.
The bankers' rescue lasted through the weekend. On Monday, October 28, the Dow fell nearly thirteen percent, and this time nobody stepped in. On Tuesday, October 29, it fell almost twelve percent more on a volume of over sixteen million shares, a record that stood for nearly forty years. Tales of ruined speculators leaping from windows were mostly legend, but the losses were real: in two days the market had shed about a quarter of its value.
The crash did not cause the Great Depression by itself. Most economists blame what came after: waves of bank failures, a shrinking money supply, a spiral of tariffs that strangled world trade, and governments that tightened budgets when they should have loosened them. But the crash shattered confidence and wiped out the savings and credit on which the boom had run. The Dow hit bottom in July 1932 at about 41, having lost eighty-nine percent of its value, and did not regain its 1929 peak until 1954. By 1933 one American worker in four was unemployed. The reforms that followed, including federal deposit insurance, the separation of commercial and investment banking, and the creation of the Securities and Exchange Commission, shaped American finance for the rest of the century.
—— WHY THIS MATTERS ——
The crash marked the end of the Roaring Twenties and the start of the worst economic crisis of modern times. The Depression that followed spread around the world, toppled governments, and created the conditions in which extremist movements, including Nazism in Germany, came to power.
It led to the modern system of financial regulation. Deposit insurance, disclosure rules for companies selling shares, limits on margin lending, and a federal securities regulator were all products of the inquiry into what had gone wrong.
It remains the reference point for every market panic. Whenever prices fall sharply, in 1987, 2008, or 2020, the comparison is with 1929. The crash is the standing reminder that markets driven by borrowed money and boundless optimism can reverse without warning.
—— THE TAKEAWAY ——
On October 24, 1929, panic hit the New York Stock Exchange, and a group of bankers with deep pockets faced it down by lunchtime. It was a brief reprieve. The following Monday and Tuesday the market fell by a quarter, and it kept falling for nearly three years. It took twenty-five years for share prices to climb back to where they had stood.
—— QUOTE OF THE DAY ——
“Stock prices have reached what looks like a permanently high plateau.”
— Irving Fisher, Yale economist, October 1929, days before the crash
—— OUR QUIZ OF THE DAY ——
How much do you know about Black Thursday, the bankers' attempt to stop the panic, Black Monday and Black Tuesday, buying on margin, and the road from the 1929 crash to the Great Depression?
